Surcharging Guidance
Surcharging guidance
Passing the fee on is legal. Doing it wrong is expensive.
Surcharging looks like the simplest answer to rising processing costs: add the fee to the ticket and stop absorbing it. The rules around it are narrow, the penalties are real, and most of the programs we review are out of compliance somewhere.
We do not sell surcharging software and we take no share of what you save. We tell you whether your program is compliant, whether it is actually saving you money, and what it is costing you where it is not.
The problem
Most surcharge programs are set up by whoever sold them
A processor or a reseller offers a surcharge program, configures the terminal, hands over a sign for the door and moves on. Nobody goes back to check that debit is excluded, that the rate is inside the caps, that the receipt prints the surcharge correctly, or that the notification the card networks require was ever filed.
That is how a merchant ends up believing they have eliminated their processing cost while quietly carrying network fine exposure and, in some states, a legal problem. It is also how merchants end up surcharging and still paying almost as much as before, because the program was priced to leave a margin in place for the party that sold it.
Surcharging is a compliance program that happens to save money. It is generally sold as a savings program that happens to have some rules.
How it costs you
Where surcharge programs go wrong
1
Debit gets surcharged
A surcharge may only be applied to credit. Debit and prepaid are excluded even when the customer runs the card as credit. If the terminal is not correctly identifying card type at the point of sale, you are surcharging transactions you are not allowed to surcharge, on every one of them.
2
The rate exceeds what you actually pay
A surcharge cannot exceed your cost of acceptance for that transaction, and it sits under a network cap on top of that. A flat percentage applied across every credit transaction will breach the cost test somewhere in your card mix unless someone has checked it against your real effective rate.
3
Disclosure is incomplete
Signage at the entrance and at the point of sale, and the surcharge itemized as its own line on the receipt. Missing any of those turns a compliant program into a non-compliant one without changing a single rate.
4
The networks were never notified
Both major networks require advance notice before a merchant begins surcharging. This step is skipped more often than any other, because it is the one that produces no visible change at the counter.
5
State law says no, or says something different
A handful of states restrict or ban surcharging outright, and others regulate how the price has to be displayed. The rules are not uniform and they have moved recently. We keep the current position by state on our surcharge laws by state page.
6
The savings are smaller than the pitch
A surcharge program does not remove interchange, it moves who pays it. If your underlying pricing was inflated before the program, it is still inflated after it, and now your customers are paying the inflated part.
The arithmetic
What surcharging actually saves, and what it does not
A surcharge only touches one part of the bill. Working out what it leaves behind is the difference between a program that helps and a program that just moves the complaint from you to your customers.
What a surcharge can offset: the cost of accepting credit cards on the transactions you surcharge, up to your cost of acceptance for those transactions and inside the network cap.
What it does not touch: debit and prepaid volume, which you may not surcharge at all. Monthly account, statement, gateway and PCI fees. Equipment and terminal charges. Batch, authorization and network access fees. Anything a processor has added to your rate above interchange, which is the part that is negotiable and the part nobody is checking.
Take a merchant running half of its volume on debit. Surcharging can address the credit half. The debit half, and every fixed monthly charge, is untouched. If the account was overpriced to start with, that overpricing stays exactly where it was, and the credit customers are now paying a percentage on top of it. That is an illustration of the structure, not a quote for your account, and it is why we look at the whole statement before agreeing that a surcharge program is the right move.
It is also worth being honest about the commercial cost. Some customers will notice the line on the receipt and some will mind. That is a judgement about your market, and it is yours to make, but it should be made against the real saving rather than the one in the sales deck.
Know which one you are running
Surcharging, cash discount and dual pricing are not the same thing
A
Surcharging
A fee added to the credit card price at the point of sale, itemized separately on the receipt. Credit only, capped, disclosed, and notified to the networks in advance. This is the most regulated of the three and the most frequently misconfigured.
B
Cash discount
The posted price is the card price, and a discount is applied when a customer pays cash. The rules and the state treatment are different from surcharging, and a program described as a cash discount but implemented as a surcharge is a compliance problem wearing the wrong name.
C
Dual pricing
Two prices displayed, one for cash and one for card, with the customer choosing before they pay. Which of the three you are actually operating is determined by how it works at the counter and what the receipt prints, not by what the paperwork calls it.
We see all three sold interchangeably by the same reseller in the same week. Terms are defined plainly in our processing glossary if you want to check what you were sold against what you are running.
The downside risk
What it costs when a program is not compliant
Card network fines, assessed through your acquirer and passed to you, which is why the first sign of a problem is usually a charge on the statement rather than a letter.
Surcharging debit is not a fine-and-carry-on situation. It is the failure most likely to be treated as a pattern rather than an error, because it repeats on every transaction.
State-level exposure where the program is restricted or the price display rules are not met.
Refund obligations, which in practice means the surcharges collected while non-compliant were never really yours.
Acquirer action, up to and including account closure, which then has to be disclosed on the next application.
None of that is a reason to avoid surcharging. It is a reason to have someone independent check the program, once, before it has been running for two years. If you already have a program in place, our surcharge compliance review is where to start.
What we do
What a surcharging review from weAudit covers
Whether debit and prepaid are genuinely excluded, checked against the transaction detail rather than the terminal settings.
Whether the surcharge rate is inside the caps and inside your actual cost of acceptance, calculated from your own statements.
Whether the required disclosures are present, correct and where they need to be, including the receipt line.
Whether the network notification was filed, and by whom.
Whether your state, and the states you sell into, allow the program you are running.
What the program is actually saving you once the processor fees riding on it are counted.
Whether the underlying pricing was fair before the surcharge was added, because that is where most of the money still is.
If a program is compliant and working, we say so and leave it alone. If it is not, you get a written list of what to change and, where the problem is in your processing agreement rather than your countertop, we handle the renegotiation.
If you have not started yet, the honest first question is whether you should. Three things worth understanding before you commit covers the trade we would want a client to think through first.
What it costs
A flat fee, and we keep 0% of your savings
Every other firm in this business charges a percentage of what it finds, typically for the next one to five years. That model pays the auditor more when your costs stay high, and it means the savings you were promised are partly theirs.
We charge a flat fee. Whatever the review saves you, you keep all of it, this year and every year after. There is no contract term and no exit fee. What an audit costs is here, in full, before you talk to anyone.
A surcharging review is normally done alongside a full processing audit, because the two questions are the same question. What are you actually paying, and what should you be paying.
Find out where your surcharge program stands
Send us a recent statement and we will tell you whether the program is compliant and whether it is saving what you were told it would save. No charge for the review.
Straight answers
Frequently asked questions
Is surcharging legal?
In most of the United States, yes, within the card network rules and subject to state law. A small number of states restrict or ban it and several regulate how prices must be displayed. The current position by state is on our laws by state page.
Can I surcharge debit cards?
No. Surcharging applies to credit only, and that holds even when a customer chooses to run a debit card as credit. Getting this wrong is the most common compliance failure we find.
What is the difference between surcharging and a cash discount?
A surcharge adds a fee to the credit price. A cash discount posts the higher price as standard and reduces it for cash. They are treated differently by the networks and by several states, and the two are frequently mixed up by the people selling them.
Will surcharging eliminate my processing costs?
It moves the credit card portion to the customer. It does not remove debit costs, monthly fees, equipment charges or the markup sitting inside your rate. If the underlying pricing was inflated, surcharging passes the inflated part to your customers rather than fixing it.
Do I have to tell the card networks?
Yes, both major networks require advance notice before you begin. It is the step most often skipped, and it is the easiest one for an acquirer to check.
What does a surcharging review cost?
It is included in our flat fee audit. We keep 0% of what you save.
Want to talk?
- Call us today 800-672-1292
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